Barrel Strength

Bill Gross of PIMCO is well known for talking up things that would most benefit his bond funds but this chart is too interesting to pass up.

The most interesting data point in this graph is Japan.  A country with declining demographics and a significant outstanding debt.  With no way to get out of mountain of debt it is safe to say that Japan as nation is in deep peril.  The problems of Greece are well known, along with their inability to do anything about it, which brings us to Canada.

If that graph had been done in the ’90s, Canada would have been a proud member of the “Rings of Fire” club.  What changed?  Starting in the early 90s the size of the Canadian government diminished and that was made possible by majority government under Liberals, which did not have to engage in negotiations with the opposition parties to implement their agenda.  This is instructive because of the problems US will face, when trying to tackle their debt.    California gives us insight into how problem will unfold at the federal level in US.  Specifically the inability to reach an agreement on budget, which Canada was able to avoid due to its parliamentary structure.  Can anybody in US say Second Republic?

Bill Gross goes on to paint a grim picture of UK, which your correspondent cannot disagree with.